Last year, soft retail markets in Europe and Japan weighed on the stock (ticker: CROX), which has tumbled 36% from the high it hit last April. Crocs, known for its lightweight resin-based shoes, makes nearly a third of its sales from those two locales. The weakness is masking significant developments that make the stock look attractive at Friday's close of $14.27.

Over the years, Crocs has been remaking itself from a company flogging one product—summer clogs—into a footwear maker for all seasons. Itsells boots, loafers, sneakers, and more, with more than 300 styles of shoes, for adults and children. Clogs account for roughly half of its sales.

Crocs has also transformed how it sells its wares, significantly boosting its retail and Internet presence. In the past, it had largely relied on wholesale distribution.

Sales and profit growth have followed, with earnings surging 66% in 2011, on 27% higher sales. When Crocs posts its 2012 results next month, analysts estimate it will show earnings rose 14%, to $129 million, or $1.40 a share; revenue, 12% to $1.1 billion. This year, EPS could rise 11%, to $1.55.

At nine times 2013 estimates, versus an average price/earnings ratio of 16 for its peers, Crocs still seems pricey to some investors. However, as the growth strategy ramps up, they could change their tune. Over the next 12 months, Crocs' shares could gain 35% or more.

Jack Otter and Sam Mamudi discuss stocks that are climbing after favorable mentions in Barron's.

Founded in 1999, Crocs introduced its clog, offered in only one style, in 2002. The clog became a huge hit, driving sales to $850 million by 2007, from just $1 million in 2003. But during the recession, Crocs faltered, as overexpansion and heavy production met with slowing consumer demand, leading to too much inventory, idle capacity, and a loss of 80 cents a share in 2008. After that, a restructuring led by new management turned it around. In 2010, with the restructuring mostly complete, Chief Operating Officer John McCarvel was named CEO.

So far, the product expansion has met with success. In the September quarter, unit sales grew 6%, driven by new products, which generated 35% of sales. As new-product growth outpaces that of clogs, clogs' share of revenue should continue to fall, stabilizing near 35%. The new styles also carry higher prices than older ones. The average sale price rose 8% in 2012 to $22.77. That will most likely continue.

Crocs

Recent Price

$14.27

52 Week Hi-Lo

$22.59 - $12.00

Market Value

$1.3 billion

2012E Revenue

$1.1 billion

2012E Net Income

$129 million

2012E EPS

$1.40

2013E EPS

$1.55

E=Estimate Sources: Thomson Reuters; Bloomberg

Crocs has made reaching consumers directly a priority, by opening full-line stores that can display 200 items or more, and closing kiosks that can hold only 20 to 30 items. In the past year, it's added a net 89 stores. The company plans to increase its store total to 625 by year end.

The strategy appears to be working. In the September quarter, retail sales jumped 18%, with global same-store sales up 1%. Year to date, same-store sales have risen 3%, despite weakness in Japan. The retail shops boast attractive margins, helping to lift Crocs' overall margins. They could hit 14.1% this year, up from 10.4% in 2010. The order backlog is up 33% from the year-earlier level, to $395 million. Many wholesale accounts boosted orders in the September quarter, ahead of the holiday season.

For the December quarter, $220 million in revenue is likely to be reported, up 12% from the total a year earlier, despite weakness in Japan and Europe. The company reiterated the guidance on a Jan. 15 filing. CEO McCarvel told Barron's he sees European sales improving this year, while his business in Japan will be flat to slightly up.

Crocs has a solid balance sheet, with $282 million in net cash and plenty of free cash flow; $124 million is expected in 2013. While 95% of the cash is overseas and thus taxable if repatriated, it gives Crocs financial flexibility. In December, the company raised its credit line from $70 million to $100 million.

Late in the year, Crocs bought back 1.13 million shares. A larger buyback is a possibility. Erinn Murphy, who covers Crocs for Piper Jaffray, notes that if it bought back $100 million of stock over the next five quarters, EPS would rise 10 cents. The company has 4.4 million shares on its existing repurchase authorization.

Even without a bolstered buyback, investors are likely to reward Crocs' stock with a more reasonable multiple. At 13 times this year's estimates, the shares would be worth $20.